Atwood hot water heater -- Too darn hot

How hot is too hot? Unless you're flashing off to steam when you open the hot water valve or you're using excessive amounts of propane, I'd be tempted to look at installing a mixing valve on the output of the water heater to mix cold with the hot enough to reduce to desired temperature at the faucets. That would give you more capacity while still addressing safety and comfort issues.

Something along the lines of this.

There are cheaper and more expensive ones and probably more appropriate connection types to fit plumbing, but just look for one that is designed for anti-scald and adjustable temperature.